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    Dell Profit Slips Badly Amid Backdrop of Takeover Tussle

    By
    Chris Preimesberger
    -
    May 17, 2013
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      As was speculated earlier this week, Dell reported a disappointing financial quarter May 16 amid an ongoing tussle over future ownership of the company.
      Dell, the world’s third-largest personal computer maker behind Lenovo and Hewlett-Packard, reported $14.1 billion in Q1 2013 revenue, which beat analyst expectations of $13.5 billion. However, it was down from $14.4 billion in the year-ago quarter.
      But the main issue is profitability. Net income slipped to $372 million (21 cents per share), alarmingly below analyst estimates of 34 cents per share. Profits were down a whopping 51 percent compared to $761 million (43 cents per share) reported in the year-ago quarter. A main reason for this drop was that the company slashed PC prices to try to slow its declining market share.
      “We have taken actions to improve our competitive position in key areas of the business, especially in end-user computing, and it has affected profitability,” Chief Financial Officer Brian Gladden said on a conference call to analysts. “We’ll also continue to make important investments to support our strategy and drive long-term profitability.”
      The global laptop and desktop computer markets have been slipping for the last few years as smartphones and tablets have moved in to replace older-style machines for many users. All the major PC manufacturers are scrambling to cut prices and add functionality to the computers in order to compete.
      Ever since Michael Dell returned after a three-year hiatus to reclaim the CEO chair in 2007, Dell has been working to morph itself into an enterprise IT solutions and services provider. Its main strategy has been to spend billions of dollars to buy vendors in hopes of building up its capabilities in such areas as storage, networking, software and the cloud.
      In hopes of accelerating that difficult transformation—and to get away from the Wall Street scrutiny of the company’s finances—Dell and equity firm Silver Lake Partners in February announced a $24.4 billion bid to buy the company back from investors in a leveraged buyout. Dell believes that a move would enable the company to take stronger actions to revive its business without having to look over its shoulder at investors.
      The Austin, Texas-based company is now the object of a takeover battle between groups led by Dell and activist investor Carl Icahn. Icahn and Southeastern Asset Management, Dell’s largest independent shareholder, were asked earlier this week to provide more details on a rival proposal that offered stockholders $12 a share in cash or extra shares.

      Dell’s take-private team includes longtime partner Microsoft.
      The stock was selling at $13.45 per share on May 16.

      eWEEK Senior Editor Jeff Burt contributed to this story.

      Chris Preimesberger
      https://www.eweek.com/author/cpreimesberger/
      Chris J. Preimesberger is Editor Emeritus of eWEEK. In his 16 years and more than 5,000 articles at eWEEK, he distinguished himself in reporting and analysis of the business use of new-gen IT in a variety of sectors, including cloud computing, data center systems, storage, edge systems, security and others. In February 2017 and September 2018, Chris was named among the 250 most influential business journalists in the world (https://richtopia.com/inspirational-people/top-250-business-journalists/) by Richtopia, a UK research firm that used analytics to compile the ranking. He has won several national and regional awards for his work, including a 2011 Folio Award for a profile (https://www.eweek.com/cloud/marc-benioff-trend-seer-and-business-socialist/) of Salesforce founder/CEO Marc Benioff--the only time he has entered the competition. Previously, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. He has been a stringer for the Associated Press since 1983 and resides in Silicon Valley.

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